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Lal v Patel [2015] FJHC 844; HBC318.2014 (3 November 2015)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION


Civil Action No. HBC 318 of 2014


BETWEEN:


GIRDHAL LAL of 656 Kirkland Avenue, Vallejo, California 94592, United States, Accountant.
PLAINTIFF


AND:


NALIN PATEL Chartered Accountant of Level 10 FNPF Place, 343 Victoria Parade.
FIRST DEFENDANT


AND:


NALIN PATEL and PRADEEP PATEL as partners in the firm of G. Lal & Co, now trading under the franchise name BDO & Associates of Level 10 FNPF Place, 343 Victoria Parade, Suva.
SECOND DEFENDANT


BEFORE : Acting Master Vishwa Datt Sharma


COUNSEL : Mr. Anil J. Singh for the Plaintiff
: Mr. John Apted for the Defendants


Date of Hearing : 10th August, 2015
Date of Ruling : 03rd November, 2015


RULING


  1. INTRODUCTION
  1. The First and Second Defendants filed two (2) separate Summons together with Affidavits In Support on 18th March, 2015 and sought for the following orders-
  2. The applications were made pursuant to Order 23 r 1(a) of the High Court Rules, 1988 and the inherent jurisdiction of the court.
  3. The Plaintiff filed an Affidavit in Opposition to both Defendants’ application.
  4. The application was heard on 10th August, 2015.
  5. Defendants Counsel furnished his written submissions to this court on 10th August 2015 and the Plaintiff’s Counsel filed his written submissions after the conclusion of the hearing on 04th September, 2015.
  1. BACKGROUND TO THIS CASE
  1. The Plaintiff commenced proceedings by a Writ of Summons and the Statement of Claim on 13th November, 2014.
  2. In essence he is claiming relief going back to 01st January, 1998 and concerns events that occurred between 1990 and 1994.
  3. Parties are not disputing that the Plaintiff was the founder of G. Lal & Co. a firm of that name now operates under franchise from the international accounting firm of BDO, as BDO.
  4. The Plaintiff and the first defendant were the sole partners from about 30 June 1983.
  5. The Plaintiff migrated to United States of America in 1991.
  6. It is not in dispute that when the Plaintiff left Fiji in 1990, he took no active part in the affairs or operations of the accounting practice in which he had been a partner with the first defendant.
  7. According to the Defendant, after the Plaintiff left in 1991, the first Defendant did not provide him with final settlement of accounts or purchase the Plaintiff’s interest as allegedly required by section 43 of the Partnership Act.
  8. The Plaintiff states that he did not receive any profits of the practice from 01st January, 1991.
  9. The Plaintiff’s first cause of action against both the first and second Defendants is that his exclusion from partnership and its rights constituted fraud.
  10. The Plaintiff also alleges that the first and second Defendants wrongfully purported to represent him in dealings with the Commissioner of Inland Revenue which resulted in an unjustified tax liability.
  11. The Plaintiff claims from the Defendants-
  12. The Defendants filed their respective Defences to the Plaintiff’s claim.
  1. THE LAW
  1. Security for costs of action, etc. (O.23, r.1)

1.-(1) Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court-


(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2), that the plaintiff’s address is not stated in the writ or other originating process or is incorrectly stated therein, or

(d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation,


then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action or other proceeding as it thinks just.


(2) The court shall not require a plaintiff to give security by reason only of paragraph (1) (c) if he satisfies the Court that the failure to state his address or the mis-statement thereof was made innocently and without intention to deceive.


(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as references to the person (howsoever described on the record) who is in the position of plaintiff or defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.


  1. ANALYSIS and DETERMINATION
  1. This is an application by the First and Second Defendants seeking separate orders for security for costs to be made against the Plaintiff on the ground that the Plaintiff is ordinarily resident out of the jurisdiction.
  2. It is appropriate that the parties to this proceeding must understand what is meant by security for costs.
  3. Security for costs is a common law legal concept of application only in costs jurisdictions, and is an order sought from a court in litigation. The general rule in costs jurisdiction is that "costs follow the event". In other words, the loser in legal proceedings must pay the legal costs of the successful party. Where a defendant has a reasonable apprehension that its legal costs will not be paid for by the Plaintiff if the defendant is successful, the defendant can apply to the court for an order that the plaintiff provide security for costs.
  4. In the present case, the Plaintiff has admitted and confirmed in her Affidavit in Opposition that she is a Resident of United States of America. She has said nothing about owning any assets in Fiji Jurisdiction.
  5. She opposes the application for security for costs but states if the court so orders, then she believes may not be able to find any more than $15,000.
  6. The fundamental principle is the right of a litigant to pursue and enforce rights in the courts. The court must have a concern to achieve a balance between ensuring that adequate and fair protection is provided to the Defendant, and avoiding injustice to an impecunious Plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings. (Case of Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWLR 598 refers).
  7. Therefore, it follows that the discretion lies with the Court to order the Plaintiff to give security for the Defendants’ costs of this action only after the Court has given due regards to all the circumstances of the case.
  8. There is no hard and fast rule that security for /b> should be d be ordered when the Plaintiff is ordinarily resident outside the jurisdiction. Hence it is not desirable to award securitycost&solely on y on the ground of plaintiff being a resa resident in another jurisdiction. Court must consider other facts incideto the proceedings.
  9. Reference is made to the White Book (1999) at page 429 – 430 (23/3/3) which states as follows;

"Discretionetionarily power to order security osts ((rr1- 3) The main ost important chan change effected by this Order rns the nature of the discretion of the Court othwhether to r to order securor costs tto be given. R(1) 1(1) pro thatCourt may order&#der <160;security for costs;#160;’if, having regard to all the circumstances of the case, the Court thinks st too'. These wore words have the effect of conferring upon upon the Court a real discretion, and indeed the Court is bound, by vithereof to considersider the circumstances of each case, and in the light thereof to determine whether and to what extent orwhat amount a Plaintiff (or the Defendant as the case may be) may be ordered to provide&#16e ity for costs. It i;It is no lonfor examplxample, and inflexible or rigid rule that Plaintiff resident abroad should provide sec for costs. Iticulheculhe former order 65 r 68 which had provided that that the power to require a Plaintiff residresident abroad, suing on a judgment or orr on a bill of exchange or other negotiable instrument, to , to give security for cost was to be in the discretion of the Court, has been preserved and extended to all cases by r.1 (1).


  1. Further, a passage froe from Sir Nicolas Brown Wilkinson VC as reported in the case of Porzelack K.G v. Porzeluck (UK) Ltd [1987] 1 W.L.R 420 at 422, 423 is of much importance to the present case. Therein it was stated as follows-

'The purpose of ordering security for co160;agai>against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available withe jurisdiction of this court against which it can enenforce the judgment for costs. It is not, in the ordinary case, in any sense designed to provide a defendant with securitycosts agai>against a plaintiof who lacks funds. The risk of defending a case brought by a penurious is as applicable to plaintiffs coming from outside the jurisdiction as it is to plaf's rnt within the jure jurisdiction. There is only one exceptioeption to that, so far as I know, namely, in the case of limited companies, where there are provisions under the Companies Act for security for costs.’


Further, where the plaintiff resident outside the jurisdiction is a foreign limited company, different factors may apply: see Under the R.S.C., Order 23, rule 1 (1) (a), it seems to me that I have entirely general discretion either to award or refuse security, having regard to all the circumstance of the case. However, it is clear on the authorities that, if other matters are equal, it is normally just to exercise that discretion by ordering security against a non-resident plaintiff. The question is what, in all the circumstance of the case, is the just answer.'


  1. The court also needs to take into consideration the following general principles and guidelines relevant to the exercise of the court’s discretion as reportedby Lord Denning in Sir Lidsy Parkinson & Co Ltd. v.Farripian Ltd [1973] 2 A.E.R. 273 at 285-286 which is of great assistance in the present case before me.

'If there is a reason to believe that the company cannot pay the costs, then security may be ordered, but not must be ordered. The court has a discretion which it will exercise. The court has a discretion which it will exercise considering all the circumstances of the particular case. So I turn to consider the circumstances. Counsel for Triplan helpfully suggests some of the matters which the court might take into account, such as whether the company's claim is bona fide and not a sham and whether the company has a reasonably good prospect of success. Again it will consider whether there is an admission by the defendants on the pleadings or elsewhere that money is due. If there was a payment into court of a substantial sum of money (not merely a payment into court to get rid of a nuisance claim), that too would count. The court might also consider whether the application for security was being used oppressively-so as to trey and stifle a genuine claim. It would also consider whether the company' want of means has been brought about by any conduct by the defendants, such as delay in payment or delay in doing their part of the work.


  1. The relevant factors reflected in the abovementioned case that needs to be taken into account in exercising the discretion cannot be stated exhaustively and will vary from case to case. Therefore, it will be grouped under the following headings-
(i) The impecuniosity of the Plaintiff

The court must first consider the threshold question of whether there is credible testimony to establish that the Plaintiff will be unable to pay the Defendant’s costs if the Defendant is ultimately successful.


However, once the Defendant has led credible evidence of impecuniosity, an evidentiary onus falls on the Plaintiff to satisfy the court that, taking into account all relevant factors, the court’s discretion should be exercised by either refusing to order security or by ordering security in a lesser amount than that sought by the Defendant. In other words, proof of the unsatisfactory financial position of the Plaintiff ‘triggers’ the court’s discretion. (Case of fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 refers).


On the outset, the First Defendant submits that a total costs are expected to amount more than $200,000 and for the Second Defendant with overseas Counsel in excess of $600,000.


Firstly, the Plaintiff has indicated in his affidavit and the Defendants have established that the Plaintiff is a Resident in the United States of America.


Secondly, there is no direct evidence from either party whether the Plaintiff has assets within Fiji Jurisdiction that may be utilized to recover costs if the Plaintiff loses the case.


Thirdly, the Plaintiff has appraised court with section 15(2) of the Constitution which has been taken into consideration. The Plaintiff stated that he would be deprived of his rights to litigation if court orders unrealistic amount of costs the Defendant is seeking.


In any event, the fundamental principle is the right of a litigant to pursue and enforce rights in the courts. The Plaintiff should not be shut out from prosecuting her case.


(ii) The bona fides of the claim

Whether the claim is bona fide or a sham is a relevant consideration, and the court will take into account the motivation of a Plaintiff in bringing the proceedings. For example, unsatisfactory pleading, or a vexatious claim, particularly where the Plaintiff is self-represented with ‘abundant time’ to pursue incessant and numerous applications. (Case of Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 refers).


Upon the perusal of the Plaintiff’s Statement of Claim filed in court, at paragraph 15, he states that “the First and Second Defendants by their actions have fraudulently deprived the Plaintiff off his interest and share in the partnership of G Lal & Co from January 1991.” He further stated at paragraph 18 ‘whilst the Plaintiff was abroad the first and second Defendants without the knowledge and or assent of the Plaintiff, fraudulently purported to act as agent for the Plaintiff in dealing with the Fiji Revenue and Customs Authority, in relation to the personal tax affairs of the Plaintiff.’


The Defendants have pleaded Defence of Limitation under the Limitation Act Cap 35, Illegality, Estoppel, Laches, Delay and Acquiescence and make further objections to the Plaintiff’s Statement of Claim in terms of disclosing no reasonable cause of action, is frivolous or vexatious, may prejudice or delay fair trial in this action and is an abuse of the process of the court.


To this, the court is of the view that it should not delve itself prematurely into the merits of the case at this stage of the case, rather deal with the pending issue of the security for costs.


(iii) The stultification factor

Where the effect of an order for security would be to stifle or end the Plaintiff’s claim, this is an important consideration to be weighed, particularly in light of the poverty rule. (Case of fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 refers).


It is appropriate to examine whether the impecunious Plaintiff is, in reality, the Defender in the proceedings, and not the attacker. It is also appropriate to look behind the actual litigant to examine the means of others who stand to benefit from the litigation.


The Plaintiff alleges fraudulent acts against the Defendants as per the Statement of Claim and deprivation of shares to the Plaintiff.


The general rule is that poverty is no bar to a litigant. The exercise of the power to order security for costs is a balancing process, requiring the doing of justice between the parties to the proceedings.


(iv) The prospects of success of the claim

A consideration of the Plaintiff’s prospects of success is an important element of balancing justice between the parties. However, care needs to be exercised when assessing the proportionate strength of the cases of the parties at the early stages of proceedings. (Case of fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 refers).


As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, then in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide and has reasonable prospects of success. (Case of KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189 refers).


As I have earlier on stated herein above that the Plaintiff’s cause of action as it can be ascertained from the Statement of Claim that “the First and Second Defendants by their actions have fraudulently deprived the Plaintiff off his interest and share in the partnership of G Lal & Co from January 1991.” Further ‘whilst the Plaintiff was abroad the first and second Defendants without the knowledge and or assent of the Plaintiff, fraudulently purported to act as agent for the Plaintiff in dealing with the Fiji Revenue and Customs Authority, in relation to the personal tax affairs of the Plaintiff.’


At this stage of the proceedings, the court should proceed on the basis that the claim is bona fide and has reasonable prospects of success. It is for the court to hear the case in terms of the evidence tendered in the proceedings and determine accordingly.


(v) The causation factor

Where the Plaintiff’s lack of funds has been caused or contributed to by the Defendant, the court will take this consideration into account. This has been the “causation” factor: (Case of fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 refers). It is a relevant consideration that an order would effectively shut a party out of relief in circumstances where that party’s impecuniosity is itself a matter which the litigation may help to cure.


However, a Plaintiff cannot rely on the poverty rule where he or she so organized their affairs so as to shelter assets. It was said that in determining the causation factor it is not appropriate to have some regard to the apparent strength of the case.


(vi) Foreign Plaintiffs

Where a Plaintiff is ordinarily resident overseas and has no assets in the jurisdiction, there must be weighty reasons why an order for security for costs should not be made. A Defendant is not expected to bear the uncertainty of enforcement in a foreign country. The difficulty in enforcing an order for costs overseas against a non-resident Plaintiff will usually be sufficient to ground an order, especially where there is no reciprocal right of enforcement in the relevant foreign jurisdiction.


(vii) Delay

Application for security should be brought promptly and delay by a Defendant is a relevant factor in the exercise of the discretion. However, the passage of time is but a factor to be taken into account in the balancing exercise. The delay must be weighed in terms of prejudice and factors that have led to the delay.


In this case the Plaintiff commenced proceedings on 13th November, 2014 and the Defendants filed separate applications seeking security for costs on 18th March, 2015, some four (4) months after.


  1. The purpose of the rule and the prima facie presumption in favour of ordering security for costs has been recognized and applied in Fiji. In this Court in Furuuchi Suisan Company Ltd v Tokuhisa [2009] FJHC 194; Civil Action 95. 2009 (9 September 2009), Byrne J said –

"31.0. The first case I mention is Porzelack (UK) Ltd, (1987), 1 All ER 1074 where Sir Nicolas Browne Wilkinson V.C. said at p. 1076: The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this court against which it can endorse the judgment for costs. It is not, in the ordinary case, in any sense designed to provide a defendant with security for costs against a plaintiff who lacks funds. The risk of defending a case brought by a penurious plaintiff is as applicable to plaintiffs coming from outside the jurisdiction as it is to plaintiff's residents within the jurisdiction.


"Under Order 23, r1 (1) (a) it seems to me that I have an entirely general discretion either to award or refuse security, having regard to all the circumstances of the case. However, it is clear on the authorities that, if other matters are equal, it is normally just to exercise that discretion by ordering security against a non-resident plaintiff. The question is what, in all the circumstances of the case, is the just answer."


  1. The rationale was also described in Sharma v Registrar of Titles [2007] FJHC 118, HBC 351. 2001 (13 July 2007), where Master Udit elaborated further –

"[3] The aforementioned rule, vests the court with an unfettered discretion to order security for costs. All this rule entails to protect is the risks to which an applicant may be exposed to for recovering of costs in a foreign jurisdiction. The quantum of costs comparatively in Fiji is not relatively high although fairly substantive within the jurisdiction which is worth recovering. Execution of costs abroad where the litigation costs are much higher will render the exercise as wholly uneconomical. Be that as it may, ultimately the issue is not that the respondent will not have the assets or money to pay the costs or that the law of the foreign party's country not recognizing an order of our court, and/or enforcement of costs order even be it under any legislation similar to our Reciprocal Enforcement of Judgments Act, (Cap 39), but it is also the extra steps which will be needed to enforce any such judgment outside the jurisdiction. Indeed, in will not be an irrefutable presumption to infer that an extra burden in terms of costs and delay, compared with the equivalent steps that could be taken in Fiji, will be an inevitable corollary. The obvious expenditure which comes to my mind is the engagement of an attorney and the conundrum of registering an order in the foreign jurisdiction before it can be enforced."


  1. The Plaintiff in this case commenced proceedings against the Defendants by way of a Writ of Summons on 13th November, 2014, wherein he claims that “the First and Second Defendants by their actions have fraudulently deprived the Plaintiff off his interest and share in the partnership of G Lal & Co from January 1991.” Further ‘whilst the Plaintiff was abroad the first and second Defendants without the knowledge and or assent of the Plaintiff, fraudulently purported to act as agent for the Plaintiff in dealing with the Fiji Revenue and Customs Authority, in relation to the personal tax affairs of the Plaintiff”’ as set out in the statement of claim.
  2. So far, the pleadings have reached the stage where the Plaintiff has obtained orders on the Summons for Directions for the Plaintiff and Defendants to file and serve their respective affidavit verifying list of documents, and inspection of documents. Henceforth, after due compliance, parties will invoke the next cause of action for a Pre- Trial Conference and minutes to be filed in terms of the High Court Rules 1988. At present, the substantive matter has come at a standstill in terms of filing of pleadings, and consequently, some four (4) months later, the Defendants thought fit to file separate applications for security for costs.
  3. The Plaintiff has not attended to the next cause of action and or filed his affidavit verifying Plaintiff’s list of documents as per the court’s order on the Summons for Directions to pursue the case further and then allow the Defendants to file their affidavit verifying Defendants’ list of documents and so on. The Plaintiff cannot just delay the prosecution of his case because of the pending application for security for cost. If the Plaintiff is at all serious about his claim, then he should have taken due diligence with the prosecution of the same rather than await the outcome of this pending security for costs application. Further, there is no evidence before me that the delay in this pending application for security for cost has caused hardship for the future conduct of this action by the Plaintiff.
  4. The First Defendant has separately sought for security for costs to an amount more than $200,000 and for the Second Defendant with overseas Counsel in excess of $600,000 respectively.
  5. The security for cost is rather ordered to secure the Defendants, in an event of Plaintiff's claim being not successful at the conclusion of the hearing. The security for cost sought by the Defendants in anticipation up to the conclusion of the case to meet the cost, if the Plaintiff's claim is dismissed, is exorbitant in nature. A decision in any case comes only after a full hearing and determination. It may not be prudent to judge a case on the face of it, prima facie.
  6. The court can order security for cost up to a particular stage of the proceedings. A further application will be required after passing that stage of the trial. The Defendants will be at liberty to make decisions whether any further applications for security for costs will be necessitated, having regards to all the circumstances of this case. Bearing in mind the present status quo of this case, it cannot be said how the case will be handled by the parties hereafter.
  7. Considering the circumstance of the case, I will order a cost of $7,500 to each of the two Defendants, a total of $15,000.
  8. This amount to be deposited into the Chief Registrar’s interest bearing account in the High Court.t Further, the Plaintiff is directed to remit the said sum within 28 days from today. If the money is not deposited within 28 days as directed herein, the Plaintiff’s case will be struck out accordingly.
  1. CONCLUSION
  1. Taking into consideration the above rational, I will accede to the First and Second Defendant’s application to order security for costs at $7,500 to each of the Defendants, a total of $15,000.
  2. The Plaintiff is directed to remit the abovementioned sum within 28 days from today. If the money is not deposited within 28 days into the Chief Registrar’s interest bearing account, the action will be struck out accordingly.
  3. The Plaintiff is also directed to file and serve his affidavit verifying Plaintiff’s list of Documents within 28 days from today and 28 days thereafter, for the two Defendants to file their affidavit verifying Defendants list of documents accordingly.
  1. FINAL ORDERS
  1. The Plaintiff is directed to deposit a total sum of $15,000 into the Chief Registrar’s interest bearing account at the High Court in Suva, as security for cost within 28 days.
  2. The action will be struck out if the abovementioned direction is not complied within the stipulated time frame of 28 days.
  3. The Plaintiff is further directed to file and serve summons for directions within 21 days from today.
  4. The cost of this application is assessed summarily at $750 and the cost should be paid to the Defendant within 21 days.
  5. The case will now be scheduled for further directions on 02nd December, 2015 at 9 am.

Dated at Suva this 03rd day of November, 2015


VISHWA DATT SHARMA
Acting Master of the High Court

SUVA

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